By: Erik Gruenwedel
With the 2012 London Summer Olympics (Games of the XXX Olympiad) scheduled over a 16-day period beginning July 27, movie rentals (and episodic TV streaming) in the third quarter are expected to take a hit, analysts say.
With the quadrennial global sporting event a major showcase for American athletes (and medals), NBC, the official Olympic TV network, will feature 115 commentators covering more than 5,500 hours of London Games coverage. Cable, satellite TV and telecommunication operators are offering more than 3,500 hours of Olympic streams to authenticated viewers. NBC also has Olympic partnerships with Twitter and Facebook.
This barrage of coverage will not only dominate primetime TV ratings, it will impact the number of people renting movie discs and streaming repurposed episodic TV programming in the current third quarter.
Netflix CEO Reed Hastings said as much during his July 24 call with analysts to discuss the subscription video-on-demand pioneer’s second-quarter results. His comments, in turn, likely contributed to Coinstar shares decreasing slightly July 25 — a day before it reports Q2 results, according to Eric Wold, analyst with B. Riley & Co. in Los Angeles.
Wold said that during the 2008 Games in Beijing, Redbox experienced a 22% drop in kiosk revenue compared to the prior second and subsequent fourth quarters.
“Management did attribute some of the softness to a poor release schedule around the Olympics and the election year cycle,” Wold wrote in a note.
Hasting, who is aggressively pushing Netflix to expand its streaming service internationally, calling it a “once-in-a-generation opportunity,” admitted subscribers view the Olympics (and other major sporting events) impartially compared to Netflix. He said that during the course of the Games he has no doubt subscribers will be shifting their viewing habits. Hastings cited the recent European Cup where Netflix streaming in the United Kingdom shot up after England’s soccer team was eliminated.
“If my nation’s team is competing well, then there’s less viewing,” he told analysts. “It's hard for us to gauge the Beijing 2008 Olympics because we had a three-day DVD outage right at the same time. I would say that we did feel some impact and there's uncertainty around whether that impact is permanent, meaning it's just a permanent reduction in acquisitions or if it's just a deferral through the games.”
Michael Pachter, analyst with Wedbush Securities in Los Angeles, said the Olympics' impact on movie rentals poses a bigger threat to brick-and-mortar rental and kiosks than streaming, since the former require consumers to leave the couch and drive in their car somewhere.
“It used to be a problem for Blockbuster and Hollywood Video. I think it depressed rental by 1% to 2% for the quarter, so more smoke than fire,” Pachter wrote in an email.
Wold said Netflix management has admitted that only a third of lost subscribers have returned following the 2011 pricing/Qwikster debacle, indicating that new subscriber additions since then have been scarce. Wall Street scuttlebutt suggests Netflix will fall short of its guidance of 7 million net new subs in 2012.
Continue Reading >Investors are recognizing the benefits of Coinstar’s acquisition of NCR Corp. (NCR)’s DVD rental business, which eliminated a large competitor, and its plans for the joint venture with Verizon, Eric Wold, a San Francisco-based analyst with B. Riley& Co., said today in an interview. The streaming business starts in August, Wold said.
“Investors are buying ahead of another round of good news to come,” said Wold, who recommends buying the stock.
Continue Reading >B. Riley & Co. analyst Eric Wold said the $76.4 million in operating income — compared to $23.7 million a year ago — speaks to how well Redbox’s workaround program is working. He said he wouldn’t be surprised if Warner came back to the negotiating table.
“With the workaround, Redbox is able to buy the titles it wants in the quantities it wants without having to stock the underperforming direct-to-video titles that Warner needs to monetize,” he said. “And getting the DVDs into the kiosks within 7 days helps to drive increased rental turns compared to the prior 28 day availability, which helps to further monetize the higher acquisition costs.
“All in all, Redbox management has learned significantly from the initial workaround attempts two years ago and is proving they can be successful, and I think they will continue to learn and improve.”
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